TEMPO.CO, Jakarta - The virtual currency Bitcoin dropped drastically following the Chinese ban on the Initial Coin Offering (ICO) crowdfunding method. Head Executive of Brave New Coin Fran Stajnar said that China’s stance caused negative sentiments at the global cryptocurrency and Bitcoin trading.

“We are not surprised by the current drop,” said Stajnar to CNBC on Tuesday, September 5.

Based on the data provided by Coindesk exchange on Tuesday, September 5, Bitcoin dropped from US$4,584 to US$4,350. Bitcoin was traded at around US$4,429 in London. Strajnar revealed that Bitcoin has yet to surpass its highest trade value of US$5,000 over the weekend.

On Monday, China’s central bank PBOC announced the use of virtual money or the Initial Coin Offering for crowd funding was illegal. PBOC had ordered every financial agencies and investor to not be involved in the ICO scheme and that the government would hand out sanctions for those who violate, as reported by Strait Times.

The ICO has profited up to US$1.6 billion and is said to be a threat towards China’s financial industry. The government reasons that many financial institutions and investors have illegally transferred its funds into the cryptocurrency and is worried that it would be used to fund illegal activities.

ICO is a way to raise funds through the virtual cryptocurrency exchange, which is similar to an Initial Public Offering (IPO) in the stock exchange. However, the companies do not profit from stock offerings but through selling virtual coins or tokens to its investors.

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